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The White House is lobbying hard for chip funding that experts say would help Pittsburgh tech firms

U.S. Commerce Sec. Gina Raimondo noted in a call with Pennsylvania reporters last week that robotics and artificial intelligence companies cannot put their technologies to use without semiconductor chips.
Rebecca Droke
U.S. Commerce Sec. Gina Raimondo noted in a call with Pennsylvania reporters last week that robotics and artificial intelligence companies cannot put their technologies to use without semiconductor chips.

U.S. Commerce Secretary Gina Raimondo made the case last week that increased investment in domestic chipmaking would benefit technological innovation in the Pittsburgh region, and industry experts agree.

“Pittsburgh is a hub of high-tech jobs and increasingly … at the epicenter of artificial intelligence and autonomous driving, [and] all of those jobs in Pittsburgh require chips,” Raimondo said in a call with Pennsylvania reporters last week.

“Artificial intelligence requires sophisticated chips,” she noted. “So all that research coming out of Carnegie Mellon [University] and [the] University of Pittsburgh, all the good biotech stuff coming out of UPMC – chips, chips, chips – can't do any of it without chips.”

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Raimondo’s remarks coincided with the ongoing global semiconductor shortage that has curbed the production of cars, home appliances, and other electronics, all of which cannot function without the components. Experts agreed with the commerce secretary that the constrained supply of chips also hobbles regional business growth by constricting innovation at Pittsburgh’s robotics and artificial intelligence companies.

“They cannot actually buy the high-performance computers that they need to basically utilize to train the artificial intelligence to make these products work. So that has clearly hampered the development side of these technologies.” Carnegie Mellon electrical and computer engineering professor Raj Rajkumar said.

In addition, he said, “Autonomous robots or vehicles have to use really cutting-edge hardware, computers and chips ... themselves. And [with] those chips being in short supply, the prices have gone up, supplies have come down, and therefore everybody has been scrambling to … place an order [and] what would have probably taken less than a week [in] normal times [to arrive] can now take months.”

Raimondo’s discussion with Pennsylvania news outlets marked part of a publicity campaign the White House staged last week to advance legislation that would boost funding for semiconductor development and manufacturing. The commerce secretary held a series of calls with local reporters, and President Joe Biden also lobbied for the Bipartisan Infrastructure Act in North Carolina Thursday.

The proposal would reconcile measures that each chamber of Congress has passed in the last year to support chip research, development, and production. The $250 billion Senate bill includes $50 billion in emergency funding to support the semiconductor industry while the House earmarked $52 billion for chipmaking.

Although the Senate proposal won bipartisan support, Republican Pennsylvania Sen. Pat Toomey voted against it, saying that it “is based on the premise that American economic competitiveness depends on government-directed spending on research and industrial policy.”

Carnegie Mellon’s Rajkumar noted, however, that federal agencies have invested billions over the course of decades to facilitate breakthroughs in consumer and military technologies such as GPS and drones.

Erik Nieves, founder and CEO of Plus One Robotics, said that public investment in chip production could pay off, too, if well-targeted. He said federal efforts should focus on how to make the parts more efficiently in the U.S. Today, the vast majority of chips are manufactured in Taiwan and South Korea.

“The truth is, the reason we outsourced [this work] to Southeast Asia … was because there were cost advantages to doing so,” Nieves noted. “If we are able to bring the foundries back, well, that's terrific. But are they going to be cost-effective?”

Plus One Robotics builds software for robots that manage warehouse inventories and orders worldwide. Based in San Antonio, the company plans to open an office in Pittsburgh’s Oakland neighborhood next month. Nieves attributed the move to the concentration of robotics talent in the region as well as the relatively low cost of living and employee turnover rate.

His company’s product relies on computer vision and artificial intelligence.

“There's chips all through that technology stack. There's chips for the vision system. There's chips for the industrial PCs that run our software. There's chips for the robots themselves. There's even chips for the controls on the conveyors [in the warehouse],” he said.

“If tomorrow we had no chips,” he added, “I would be looking at my workforce and saying, ‘Well, we're not able to deploy systems. If I can't deploy systems, I can't generate revenue. So we're going to have to [put a] hold on additional hires until such time as the robots [already] in the field are generating cash. … So the lack of chips acts as a brake on growth.”

Raimondo said before the pandemic, companies typically had enough chips on hand to last 40 days. But today, those inventories stretch an average of fewer than five days, she said.

“Even more concerning for America's national security, 90 percent of the world's most sophisticated semiconductors are made in Taiwan," she added. "Zero percent are made in the United States of America."

Rajkumar noted that, while U.S. chipmaker Intel produces the components for its own devices, firms in Taiwan and South Korea have far greater capacity to produce the most complex semiconductors.

Raimondo speculated that, with more federal support, chip manufacturers could invest more domestically and possibly even in Pennsylvania.

“I think it's very, very possible that a chip company would choose to set up a big operation in Pennsylvania,” she said. “Whether or not they do that is their choice”

Intel passed over the Keystone State in its search for a location for a $20 billion fabrication plant it now plans to build outside Columbus. In the past 15 years, funding for the economic development agency tasked with attracting new business to Pennsylvania has plummeted by 80% amid stiff competition from states in the South and Midwest.